There has been quite a buzz around the pre-owned luxury car segment in recent years. The lifestyle changes triggering alteration in consumer behavior have proved to be an important factor in giving the much-required push to the industry.
The year 2021 started with a very anxious note. The industry leaders were skeptical about the market since the preceding year had shown a remarkable slump in the pre-owned luxury car segment owing to the disruptions due to the lockdown. But contrary to the previous year, 2021 saw the rise of a new set of customers who paved a very promising landscape for the expansion of the sector.
Rise in women buyers in Tier II, III cities
There has been a rise in inter-city travelers and also in the number of women buyers for an easy commute to the workplace. Together they formed the bulk of aspirational buyers in Tier II and III cities, driving the demand for pre-owned luxury cars post lockdown. This penetration beyond the metropolitan cities can be attributed to the increase in the disposable income frame of the individuals.
Previously only the elite class with ultra-high net worth had the capacity to buy luxury cars but expansion in income bandwidth of people opened the gateway for ordinary individuals to purchase the state-of-art luxury cars. The new set of extensive customers emerged being sensitively conscious in showcasing extravagance within their budget by opting for the pre-owned luxury car instead of a new one.
Pandemic plays spoilsport
The pandemic posed great challenges on the financial front. People were forced to reconsider their expenses to make place for all their necessary requirements. Against such heavy economical constraints, it was deemed sensible to invest in an affordable pre-owned luxury car coming with uncompromising performance rather than going for an expensive new car.
The customer-friendly government policies bringing in promising fiscal and monetary measures have played an instrumental role in giving the desired boost to the industry. Earlier, the pre-owned luxury car segment was predominantly unorganized and transactions took place at a local level, forcing people to think that the industry was dubious and swindled with their hard-earned money.
GST ushers uniformity in taxation
The introduction of GST by the government legalized the purchase in the segment. It brought about a uniformity in the taxation structure giving benefits to both the buyer as well as the seller. Overlooking a transparent transaction well coupled with warranty schemes instilled faith amongst the prospective consumers, encouraging them to purchase a pre-owned car without any doubt or stress.
Having taken a look at the market trends of 2021, there is a great deal of activity in store for the upcoming year. 2022 will be an extension of the developments happening in the present year. There are various factors that will contribute to the further growth of the pre-owned luxury car segment.
Omicron to place importance on personal mobility
As there is speculation that a new wave of Omicron is likely to play havoc, there will be demand for personal mobility options to observe social distancing measures effectively. This will lay great stress on automobile manufacturers to keep up with the pace of the rising demand. To fill in the gap, going for a pre-owned luxury car will be the most pragmatic option available to the customers.
Even before the start of the new year, announcements from companies like Maruti, Mercedes-Benz, Audi have confirmed that there will be a price hike on all or certain selected models in the year 2022 due to the rising input costs and increasing operational costs.
Price hike due to shortage in semiconductor chips
The shortage in semiconductor chips have augmented the price hike and also delayed the manufacturing of the new cars. Altogether, they have been a deciding factor in turning the tide against the purchase of new cars as the customers will be discouraged to pay for additional costs for brand new cars when they have the option of seizing a much better deal of flaunting a luxury car at an economical price.
The waiting period for a brand new car can further add to the resistance in buying a new car. In India, the waiting period for popular models can extend to almost 10 months. The customers at the brink of their patience and in utter need of a vehicle will not be complacent enough to keep hold for such a long time.
As the pre-owned luxury car segment is gaining popularity, to ramp up the expansion in the segment, the industry giants will have to incorporate a futuristic plan of action to outline the path ahead. Coming up with omnichannel selling experiences to fulfill the varied needs of the customers is a good way to go ahead.
(Sumit Garg, MD and Co- Founder, Luxury Ride)
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